Unless you’ve been hiding under a rock, you’ve likely noticed TikTok’s meteoric rise to become a behemoth amongst social networking apps.

The app, owned by Chinese technology company ByteDance, enables users to create and post short-form videos which are shared on the platform. The app presents an algorhythmically tailored video feed to users via the ‘For You’ homepage, and boasts diverse content with categories ranging from comedy to cookery.

TikTok is unique to its competitors (such as Meta and Snapchat) as it offers a content-driven approach that appeals to users regardless of whether their peers are on the app. It’s grown faster than any other social network[1] and was among the greatest beneficiaries of UK lockdown measures – 18-24 year old user minutes doubled in April 2020 compared to February, and this level has largely maintained since. In contrast, Snapchat and Meta’s minutes for this demographic have declined.

Advertising revenue gains

TikTok has an advertising focused business model and has become a lucrative and attractive outlet for advertisers. Generating almost $4 billion in ad revenue last year, and seeking to triple that to at least $12 billion this year, TikTok has harnessed its status as a global user phenomenon to develop into a serious online advertising business.

Regulatory change

Social media platforms such as TikTok may not have welcomed the news that the UK government intends to review and potentially reform regulation of the online advertising ecosystem under its Online Advertising Programme (OAP).

On 9 March 2022, the government launched a consultation to review the current regulatory regime for paid-for online advertising. The government is concerned that the rapid development of digital technologies has transformed the scale and complexity of online advertising, leading to increased consumer harm.

The current regulatory regime (regulated by the Advertising Standards Authority (ASA)) primarily holds advertisers responsible for preventing consumer harm. The OAP wants to ensure that all players across the supply chain play a role in reducing harms created by online advertising.

Ad-funded social media platforms that attract consumers by offering their core services for free (like TikTok) are within the scope of the OAP.

What are the next steps in the process?

The OAP consultation set out the government’s understanding of the online advertising ecosystem, priority areas of concern and requested stakeholder views. The OAP plans to publish its recommendations in due course.

The options being considered for reforming online advertising regulation include:

1. expanding the current remit of the ASA’s self-regulatory approach,
2. introducing a statutory regulator to backstop more fully the self-regulatory approach, or
3. abandoning the self-regulatory system altogether and appointing a statutory regulator to put in place a full statutory system of online advertising regulation.

What do platforms need to do?

Future steps that platforms like TikTok may need to consider include:

• designing the platform to make it easier for people to label and report advertising
• establishing strong policies regarding the type of advertising permitted on the platform
• carefully managing the operation of ad tech and artificial intelligence on the platform

Platforms should begin to closely inspect their advertising practices to ensure they won’t need to make significant changes – stronger regulation is coming, and preparation will be key.

[1] TikTok joined the billion users club in 2021 four years after its global launch, reaching this milestone in half the time that it took Facebook, YouTube or Instagram and three years faster than WhatsApp.

This article was first published as part of our “Expert insight on advertising, marketing & sponsorship” publication. Read insights on similar topics in the full publication here.